Analysis: China's polycrystalline silicon industry faces opportunity and risk

Xinhua Economic News Service, April 17, 2008 Thursday 11:10 PM EST

BEIJING, April 18 (Xinhua) - China's polycrystalline silicon industry is faced with an opportunity of increasing market demand as well as risks of overcapacity and repeated low-level construction

-- Robust demand pushes development of polycrystalline silicon industry

The global supply of polycrystalline silicon, a key raw material for producing semiconductor devices and solar cells, cannot meet the increasing market demand, offering an opportunity for China's polycrystalline silicon industry. The supply shortage will last until 2010.

As a result, polycrystalline silicon price surged from less than 40 US dollars/kg in 2003 to around 300 dollars/kg at present.

It is predicted that the polycrystalline silicon demand from semiconductor device manufacturing will hit 35,000 tons in 2010, and that from solar cell making will reach 50,000 tons.

--- Rapid expansion of polycrystalline silicon industry in China

The Leshan city in southwest China's Sichuan Province boasts a completed polycrystalline silicon production capacity of 15 million tons a year, accounting for nearly 80 percent of the national total. A national production base is looming in the city with a number of projects putting into operation and new projects starting construction this year.

The city plans to invest 20 billion yuan in the following five years to develop China's largest polycrystalline silicon production base with an annual polycrystalline silicon production capacity of 19, 500 tons and monocrystalline silicon production capacity of 2,000 tons, according to Jiang Xiaoting, a senior official of the city.

--- Hidden problems

Construction of polycrystalline silicon projects should be deployed in line with industrial characteristics, noted Jiang, adding that concentrated construction of large-scale production base is conducive to making better use of infrastructures and sideline products, dealing with waste and pollution and avoiding repeated introduction of foreign technologies.

Technology is a bottleneck for further development of China's polycrystalline silicon industry.
At present, China's production cost is twice that of economically developed countries, thus weakening the competitiveness of Chinese polycrystalline silicon.

If all the planned projects are in full operation, China is estimated to form a production capacity of 100,000 tons. In addition, the production capacity on overseas market will increase as well. The problem of overcapacity will occur, if downstream users cannot develop in an accordant pace.